[2024] L4M3 Answers L4M3 Free Demo Are Based On The Real Exam
L4M3 [Mar-2024 Newly Released] Exam Questions For You To Pass
NEW QUESTION # 14
Which of the following may be a benefit for purchaser in using call off contract?
- A. Ability to discover new potential suppliers
- B. Maintaining a degree of competition between suppliers
- C. Secured supply
- D. No long-term commitment required
Answer: C
Explanation:
Benefits for the purchaser in using call off contract are as below:
- The benefit of a call off contract is that they allow the supply of materials, goods and services to be secured over multiple delivery dates across the length of a project.
- Agreed prices, either fixed or pre-agreed mechanism for adjustment. This helps with setting and controlling budgets.
- Simple order mechanisms at the point of need
- Schedules of rates pricing enables electronic procure-to-pay systems, which gives greater control and visibility of spend
- The value of spend ad length of contract justify the cost of proper market engagement and tender or negotiation processes resulting in better value for money
- The longer the contract, the greater the opportunities for aligning working practices to create joint efficiency.
Reference:
- Call Off Contracts - What are they and how are they used?
- CIPS study guide page 63-64
LO 1, AC 1.3
NEW QUESTION # 15
Which of the following should be specially noticed in market dialogue with suppliers in specification development?
- A. The buying organisation must avoid social media at all cost
- B. Both parties must respect confidentiality
- C. Market dialogue is banned in the public sector
- D. Market dialogue should only be conducted with well-known supplier
Answer: B
Explanation:
Being clear on your objectives helps you to design the best approach to the dialogue. There are some notices in developing dialogue with suppliers:
- All meetings should be documented
- Respect commercial confidentiality. Although insights gained from one conversation lead to questions in another, you must be very careful not to allow this to happen in a way that breaches the confidentiality of the first conversation.
Reference:
LO 2, AC 2.1
NEW QUESTION # 16
EAC Facilities Management is planning for a new construction project in the suburban are a. They decide to use NEC or FIDIC model form of contract for this project. Is this a right course of action?
- A. No, the contractor won't understand the legal terminology in the contract forms
- B. No, the buyer will bear all the risks derived from the contract
- C. Yes, these forms aim at balanced risk/reward allocation between the parties
- D. Yes, using these forms will eliminate all the risks
Answer: C
Explanation:
Construction procurement is particularly complex and risky. Forming a contract in construction may take lots of time and energy of both client and contractor. Therefore, standardisation in construction contract would help the buying organisation to save their precious resources. Furthermore, the wording of these model form contracts is accurate as it has been agreed among the professionals within an industry.
One of the advantage of using model forms of contract is the balanced of risk and reward allocation between the contractor, consultant engineer and the client.
Reference:
- An Introduction to FIDIC model contracts
- CIPS study guide page 139-147
LO 3, AC 3.1
NEW QUESTION # 17
A construction company is undertaking a housing development project. They need lots of bricks and other building materials, but the construction site doesn't have large area for storage of materials. Therefore, the company's suppliers must deliver the building materials with fixed quantity and at fixed time intervals. What type of contract is used between the construction company and its suppliers?
- A. One off contract
- B. Call off contract
- C. Framework agreement
- D. Spot transaction
Answer: B
Explanation:
In the scenario, the contract between the company and its suppliers is continuous rather than one-off. So it cannot be one-off contract or spot purchase. The quantity and time is well known and fixed, this type of contract is known as call-off contract or blanket order.
Reference:
LO 1, AC 1.3
NEW QUESTION # 18
The model form contract invented by Institute of Civil Engineers is...?
- A. NEC
- B. IMechE/IET
- C. JCT
- D. FIDIC
Answer: A
Explanation:
NEC - New Engineering Contracts is a family of contracts invented by Institute of Civil Engineers. The contracts are suitable for procuring a diverse range of works, services and supply, ranging from major framework projects through to minor works and the purchase of supplies and goods.
FIDIC is a French language acronym for Federation Internationale Des Ingenieurs-Conseils, which means the international federation of consulting engineers. It was started in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership from over 60 different countries. FIDIC published its first contract, titled The Form of contract for works of Civil Engineering construction, in 1957. As the title indicated, this first contract was aimed at the Civil Engineering sector and it soon became known for the colour of its cover, and thus, The Red Book. It has become the tradition that FIDIC contracts are known in popular parlance by the colour of their cover. This first contract by FIDIC was undertaken jointly with the International federation of Building and Public works. FIDIC's concerted effort at achieving broad consultation and acceptance of its contract forms has seen subsequent editions of its contracts being ratified by the International Federation of Asian and Western Pacific Contractors Association, Associated General Contractors of America and the Inter-American Federation of the Construction Industry, Multilateral Development Banks among others. Because of the broad support it enjoys, FIDIC contracts are the foremost contracts in international construction.
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has expanded the number of contributing organisations.
IMechE/IET: Institution of Mechanical Engineers/Institution of Engineering and Technology - two separate institutes that issue jointly agreed model forms covering the design, supply and installation of electrical, electronic and mechanical plant including special conditions for the ancillary development of software.
Reference:
LO 3, AC 3.1
NEW QUESTION # 19
SFO procurement manager sent a request for quotation to Vogon International in which he determined the contract terms and specification. In SFO's standard terms and conditions, it is stated that 'Goods shall be delivered and Services performed by the applicable Delivery Date. Supplier must notify Buyer 3 days prior to the Delivery Date if Supplier is likely to be unable to meet a Delivery Date.' Vogon replied with a quotation without any amendment to SFO's terms & conditions. The SFO procurement manager found the prices were reasonable and submitted to senior management. Senior management team accepted that quotation and sent a notification to Vogon. On the Delivery Date, Vogon said they had no capacity to supply the product as the quotation due to a workers' strike. Did Vogon breach any agreement with SFO?
- A. No, because Vogon had no intention to be bound by the quotation, therefore, it didn't constitute a contract
- B. Yes, because the contract was formed since Vogon had sent the quotation as an acceptance to SFO's offer
- C. No, because the strike is a force majeur event, so Vogon did not breach any contract with SFO
- D. Yes, because the contract had been formed between SFO and Vogon with the quotation as an offer and the notification as an acceptance
Answer: D
Explanation:
SFO issued an RFQ with defined terms and condition and detailed specification. This RFQ can be considered as an invitation to treat. Vogon's quotation is an answer to the purchaser's RFQ and is an offer to SFO. The contract come to life at the time Vogon received the notification from SFO senior management.
The strike may be a force majeur event, depending on the contract particular clauses and jurisdiction. In common law countries, force majeur is applicable as an exclusion of liability only if the contract allows it. In many civil law countries, force majeur is an implied term. But in every jurisdiction, force majeur is only a reason for excluding liability for non-performance of a contract. In other words, the non-performance party is not liable for any breach if force majeur event occurs but the event does not exclude the breach.
LO 1, AC 1.2
NEW QUESTION # 20
Which of the following is always automatically considered as a contract?
- A. Framework arrangement
- B. Performance management framework
- C. Call-off
- D. Framework agreement
Answer: C
Explanation:
- A call off or a term contract is one which exists for a fixed period of time, rather than for a specific purpose
- A formal framework agreement does have some legal standing but it is not a contract, primarily because there is no consideration involved, but it is an overarching (or umbrella) agreement under which contracts can be created (this holds true in English law but may not be right in other jurisdiction)
- A framework arrangement is a rather loose set-up, without any legal standing. It usually occurs when an organisation has decided for itself to limit the number of suppliers it is willing to work with and, through a purely internal process, sets up an approved list of such suppliers.
- A performance management framework including KPIs and targets, the assessment scheme and incentives, disincentives, bonuses and penalties. It is a schedule to a contract and only legally binding if it is referred from contract clauses.
Reference:
LO 1, AC 1.3
NEW QUESTION # 21
XYZ Ltd is negotiating a long-term supply contract of important parts with a supplier. Dave, procurement manager teams up with Alla, legal manager to construct a service level agreement. Dave is concerned that poor performance of supplier may cause damages to the operations of the organisation. Which of the following can be used in conjunction with SLA to compensate the buying organisation in case of supplier's poor performance?
1. Warranties
2. Force majeure clauses
3. Penalty clauses
4. Service credits
- A. 3 and 4 only
- B. 1 and 2 only
- C. 4 and 2 only
- D. 1 and 3 only
Answer: A
Explanation:
Service level agreement often sets out the minimum quality standards of the services provided, remedies if that standards are not met, consequences if the targets are exceeded. Penalty clauses and service credits are remedies that are often used in conjunction with service level agreement to ensure the performance and to compensate the purchaser if targets are not met.
Reference:
LO 2, AC 2.2
NEW QUESTION # 22
An organization has a normal tender process that often last 1 month from defining the needs to contract award. Manufacturing department suddenly required a new special part that they could not foresee within a month. Which of the following should be the priority actions of procurement manager in this urgent situation? Select TWO that apply:
- A. Develop relationships with potential suppliers
- B. Submit full business justification
- C. Get high-level authority approval
- D. Review contract performance
- E. Design new specification
Answer: B
Explanation:
This urgent needs occasionally occur due to a sudden change in circumstances. The process for selecting a replacement supplier must still be controlled. If there is a reason for normal processes to be waived, this must be fully documented and approved at a high level.
Reference:
LO 1, AC 1.1
NEW QUESTION # 23
A procurement manager is setting KPIs measurement for user satisfaction. He also wants to encourage users to share the reason why they feel the way they do. Which of the following types of KPI should the procurement manager apply?
- A. Quantitative measure
- B. Qualitative assessment
- C. Binary measure
- D. Numerical measure
Answer: B
Explanation:
There are 3 types of KPI measure:
- Binary KPIs
- Quantitative KPIs (or numerical)
- Qualitative KPIs
User satisfaction is subjective, therefore, using qualitative assessment is the best answer.
Reference:
LO 2, AC 2.2
NEW QUESTION # 24
Which of the following statements is true about model form of contract?
- A. The standard clauses of model contract forms give the offeror legal advantages over the offeree
- B. Only the publishers of model forms of contract can edit the clauses of these forms
- C. Model contract form's standard clauses often contain correct legal terminology without recourse to third party experts.
- D. When model contracts are employed, there are no requirements for legal advice and input
Answer: C
Explanation:
Model forms of contract are published by some industry or professional organisations such as FIDIC, ITC, CIPS,... These forms are often carefully prepared by legal professionals, with correct legal terminology. The standard clauses within these forms are based on fair and balanced risk/reward allocation between the contracting parties. The model contract forms also include standard clauses to be selected or deleted on an as required basis.
Despite being standardised to be used in any jurisdiction, legal advice may be required if the users decide to make variations to the forms.
The correct answer should be "Model contract form's standard clauses often contain correct legal terminology without recourse to third party experts." Reference:
LO 3, AC 3.1
NEW QUESTION # 25
A large company supplies a lot of products. Their shipments are often delayed and customers are not satisfied. Which of the following KPIs is most likely to be applied to this situation?
- A. Consignment stock availability
- B. Technical support
- C. OTIF delivery
- D. Delay damages
Answer: C
Explanation:
If the deliveries often delay, buyer should use KPI to measure how many missed deliveries there are and the percentage of total missed deliveries on total number of deliveries for period. OTIF (one-time in-full) delivery might help.
Consignment stock availability means that the supplier holds adequate range/number of units of stock to offer a reliable service Delay damages are the consequences caused by delay of deliveries Technical support is the acceptable quality of technical information/support provided by supplier for goods supplied.
LO 2, AC 2.2
NEW QUESTION # 26
Since services are intangible, so KPIs for services must be qualitative in all circumstances. Is this statement correct?
- A. No, KPIs for services must always be quantitative so that they can be measured easily
- B. Yes, the only measure mattered to supply of services is end-users' satisfaction
- C. No, some KPIs for services are measurable by means of outcome, time and space performed
- D. Yes, quantitative KPIs are limited to timeliness of supply of goods, defective rates and in-full quantities, which are applied to monitor supplier of physical goods
Answer: C
Explanation:
KPIs are used to monitor supplier's performance. They can be qualitative or quantitative. Of course, service providers can be monitored by quantitative KPIs regarding the outcome achieved (such as uptime in IT contracts), timeliness of deliveries (such as in construction contracts)...
Reference:
LO 2, AC 2.2
NEW QUESTION # 27
Which of the following is the contract provision that relieves the parties from performing their contractual obligations when certain circumstances like natural disasters, terrorist attacks, etc arise?
- A. Insurance clause
- B. Liquidated damage clause
- C. Indemnity clause
- D. Exclusion clause
Answer: D
Explanation:
The contract provision that relieves the parties from performing their contractual obligations when certain circumstances like natural disasters, terrorist attacks, etc arise is called Force majeure. Force majeure is an example of exclusion clause.
An exemption clause in a contract is a term which either limits or excludes a party's liability for a breach of contract. In order for an exclusion clause to be binding and operable upon the parties, the clause must:
1. The clause must be incorporated into the contract as a term.
2. The clause must pass the test of construction.
3. The clause must not be rendered unenforceable by the statutory provisions in the Unfair Contract Terms Act 1977 or the Consumer Rights Act 2015 (enacting the Consumer Rights Bill 2013-14).
Reference:
- Exclusion Clauses Lecture
- CIPS study guide page 149
LO 3, AC 3.2
NEW QUESTION # 28
A tire manufacturer entered into a contract with a distributor. In the contract, the distributor is prohibited from selling the tire under the price list. The distributor must pay $5 for each tire sold in breach. The amount of $5 is known as...?
- A. Penalty
- B. Quantum meruit
- C. Caveat Emptor
- D. Liquidated damages
Answer: D
Explanation:
This scenario is in fact based on a famous case law: Dunlop Pneumatic Tyre Company v New Garage & Motor co [1915] AC 79. In this case law, the House of Lords identified the clause as liquidated damages, and therefore enforceable.
However, if this case had happened in 2015 or afterwards, there would be some legal issues:
- The price agreement is prohibited by Competition Act 1998
- If the agreement is allowed by Competition Act, as in the case Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent), the clause can also be identified as a penalty and it is still enforceable.
Reference:
LO 3, AC 3.2
NEW QUESTION # 29
Which of the following are likely to be implied terms in a contract? Select TWO that apply:
- A. Contract appendix
- B. Legal precedence
- C. Statute
- D. Definition & interpretation
- E. Contract clause
Answer: B,C
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
- terms implied under statute
- terms implied under common law
- terms implied because of custom or usage
- terms implied due to previous dealings
- terms implied 'in fact' or to reflect the parties' intentions
Reference:
- Contracts: Express and Implied Terms
- CIPS study guide page 32
LO 1, AC 1.2
NEW QUESTION # 30
Which of the following should include in the service level agreement that is an appendix of a contract?
1. How often the service is measured
2. Minimum qualification of supplier staffs
3. Remedies to resolve dispute
4. On time service delivery
- A. 1, 3 and 4 only
- B. 2, 3 and 4 only
- C. 1, 2 and 4 only
- D. 1, 2 and 3 only
Answer: C
Explanation:
When the SLA is a schedule or an appendix to the contract, it should clearly state the following:
1. KPIs: how they are to be measured, who measures them and how often
2. How the measurements convert into scores
3. Any other service level standards, which may be of lesser importance than the KPIs
4. Minimum acceptable standards or scores in each case
5. Range of scores both above and below the minimum acceptable
6. Any mitigating factors which might apply in the event of poor performance
7. Any time period permitted in which to remedy a situation or poor performance.
In this question, "2. Minimum qualification of supplier staffs" and "4. On time service delivery" are the KPIs, while "1. How often the service is measured" is the frequency in which the KPIs are measured.
The remedies available in the event of poor performance should be set out in the body of the contract, along with those for any other contractual breach. These clauses should be cross-referenced in the SLA.
Reference:
LO 2, AC 2.2
NEW QUESTION # 31
Which of the following is likely to reduce risks of different rules regarding when offers and acceptance become effective between legal systems?
- A. Time lapse
- B. Deemed receipt protocol
- C. Letter of intent
- D. Withdrawal protocol
Answer: B
Explanation:
Regarding rule of offer and acceptance, there are some differences among legal system around the world. For example, mailbox rule is generally applied in common law countries such as UK, US, Australia,.. while it is ignored in civil law countries. To clarify on rule of offer and acceptance in international trade, offerors may use expressed terms in their offers. These terms known as deemed receipt protocol.
Reference:
LO 1, AC 1.2
NEW QUESTION # 32
Under general legal principles of contract formation, which of the following will always automatically result in the termination of an offer?
1. Negotiation
2. Rejection
3. Failure conditionality
4. Non-disclosure
- A. 3 and 4 only
- B. 1 and 4 only
- C. 1 and 2 only
- D. 2 and 3 only
Answer: D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
1. Revocation
2. Rejection
3. Lapse of time
4. Conditional Offer (or Failure of Conditionality)
5. Operation of law
6. Death
7. Acceptance
8. Illegality
Reference:
- How Is an Offer Terminated?
- CIPS study guide page 31-32
LO 1, AC 1.2
NEW QUESTION # 33
According to mailbox rule in some common law countries, at which point the offeree's acceptance will be effective?
- A. When the letter of acceptance has been written.
- B. When the letter of acceptance is received by the offeror.
- C. When the letter of acceptance is opened and its contents read by the offeree.
- D. When the letter of acceptance has been correctly addressed, its postage paid, and posted.
Answer: D
Explanation:
When parties do not negotiate face-to-face, a key Question: becomes when things like acceptances, rejections and revocations take effect. The general rule is that acceptances are effective on dispatch (when they are mailed). Everything else becomes effective when the offeror actually receives them. This idea is codified by the "mailbox rule" which states that acceptance is effective on dispatch, even before the offeror has received it. (The one minor exception to this rule involves option contracts for which acceptances are not effective until they are received by the offeror.) Reference:
- The Mailbox Rule
- CIPS study guide page 34
NEW QUESTION # 34
Which of the following will be included in a conformance specification?
1. Brand names
2. Description of the operating environments
3. Chemical formulae
4. Required safety level
- A. 1 and 4 only
- B. 1 and 2 only
- C. 1 and 3 only
- D. 2 and 3 only
Answer: D
Explanation:
According to CIPS, there are two main types of specification:
- Conformance specification - is more output driven as it outlines the product details exactly which may include the material, dimensions, tolerances, source, ingredients, packaging, storage of the part or material.
- Performance specification - is more output driven in terms of what the part or material must achieve.
Among the four options, only 2. 'Description of the operating environments' and 3. 'Chemical formulae' are possible components of a conformance specification. Brand names can be a part of a performance specification, according to a document published by CIPS and NIGP.
Reference:
- CIPS study guide page 8-10
- Knowledge Byte - Specification Development
- Principles and Practices of Public Procurement: Specifications
LO 1, AC 1.1
NEW QUESTION # 35
A procurement professional is drafting payment terms for a commercial contract. He is considering about payment method if defective products are found. Which of the following should be embedded in payment terms to control this issue?
- A. Pay-less notice
- B. Remedies for late payment
- C. Invoice preparation
- D. Retention clause
Answer: D
Explanation:
Retention money is the payment for a service or product that is withheld pending the completion of some specified condition. For example, buyer may withhold the amount due until the supplier replace all defective goods.
Pay-less notice is the notice under a contract which states that the invoice will only be partially paid because of some issues such as supplier has to pay the damages.
Remedies for late payment are remedies that supplier may seek when a buyer pay it later than the stated payment terms. Normally, the buyer will be charged an interest rate.
Reference:
LO 3, AC 3.3
NEW QUESTION # 36
Which of the following are likely to feature within an outcome-specification?
1. Dimension
2. Performance requirement
3. Input material
4. Product function
- A. 2 and 4 only
- B. 3 and 4 only
- C. 1 and 2 only
- D. 1 and 3 only
Answer: A
Explanation:
There are two main types of specification: performance specification and conformance specification (sometimes called prescriptive or technical specifications).
Performance specifications have following features:
- Focus on outputs
- Set out result to be achieved
- The 'what', not the 'how'
- Give supplier flexibility to present solutions that the buyer may not have considered Reference:
LO 1, AC 1.1
NEW QUESTION # 37
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